>Pretty astounding first how low rates were driven by Easy Al, and second, all the sturm und drung over what is essentially a rise to historically modest levels. Note thta during most of the 1980s, when Reagan was Prez and the great Bull market in histroy got underway, mortgage rates were above 10% — but falling — for nearly the entire decade.

This chart suggests (at least to me) how feeble the economy has been, and reveals that it was very dependent upon Real Estate as an engine of growth.

The second chart up uses the University of Michigan sentiment survey of Housing, as a leading forecastor for GDP:>

Housing Sentiment versus GDP; 1988-2006click for larger chart[4]

>How does Housing sentiment forecast GDP ?

"The University of Michigan regularly surveys consumers on whether or not it is a “good time” to purchase a home. This survey attempts to gauge whether or not consumers feel (a) housing is a good investment, (b) housing prices are low and there are good deals available, (c) interest rates are low, and (d) times are good. The index has ranged from 53 (low) to 87 (high) over the past eighteen years and is currently at 57 indicating that consumers do not feel it is a “good time” to buy a house. This is likely due to high home prices and rising interest rates as well as a growing belief that housing is unlikely to be a good investment going forward. Interestingly, the University of Michigan survey on housing tends to lead U.S. economic growth by a few quarters (chart above). The sharp deterioration in this survey from 75 early last year to 57 now suggests the U.S. economy should start to slow soon."

Let’s put this into more concrete terms than "GDP." How about Consumer Spending ?

>

Consumer Spending versus Housing Index; 1986-2006

click for larger chart[5]

>

Add these three charts together, and we see an anemic, post crash, real estate dependent economy, so feeble that a rise in Mortgage rates from 46 year lows to 35-40 year lows as fatal.

I’ve said this so many times, please forgive me for repeating myself: As goes real estate, so goes the US economy.